Starbucks CEO Steps Down Amidst Declining Sales | Business Update
Starbucks has abruptly replaced its CEO following a larger than expected decline in sales.
The board of the coffee chain announced on Tuesday that Laxman Narasimhan had left the company “effective immediately”.
They revealed that Brian Niccol, the current CEO of Chipotle, would be taking over soon.
This move comes after increasing pressure and speculation about the future of Mr Narasimhan, who had only been in the position for a year and a half.
Last month, Starbucks reported a 3% global sales drop during the third quarter, exceeding analysts’ forecasts and adding to a series of disappointing financial results.
In addition to declines in regions like the US and the Middle East, sales in China dropped by 14% during that period.
The decreased sales have been attributed to weaker demand due to price hikes and boycotts related to the conflict in Gaza.
Mr Narasimhan, a former CEO of Reckitt, had faced criticism for his lack of experience in the restaurant industry.
Laxman Narasimhan. File pic: AP
Despite extensively studying Starbucks‘s business, including training as a barrister, Mr Narasimhan faced additional pressure in May when former CEO Howard Schultz called for improvements.
Activist investor Elliott Investment Management, after acquiring a $2bn (£1.55bn) stake, also pushed for changes in the company.
Mellody Hobson, who stepped down as chairman to lead the board as part of the reorganization, revealed to CNBC that she had been advocating for Mr Narasimhan’s replacement “a couple of months ago”.
Mr Niccol, with experience at major US food brands like Taco Bell and Pizza Hut, will assume the role of CEO on 9 September.
Ms Hobson expressed her excitement, stating: “His exceptional career speaks for itself.”
New Starbucks boss Brian Niccol. Pic: AP
Mr Niccol is credited with revitalizing Chipotle’s performance, leading to an almost 800% increase in the stock price under his leadership.
Mr Schultz welcomed the appointment, cautioning that the company is at a crucial juncture in its history.
Following the announcement, Starbucks shares surged by more than 20% in early trading, while Chipotle’s stock dropped by over 10%.
Read more from business:
£10m spent on Euros final beer
‘Electricity super highway’ approved
Surprise fall in unemployment rate
Starbucks’ CFO, Rachel Ruggeri, will act as interim CEO in the interim.
Mr Niccol expressed his excitement in a statement about taking on the role and his belief in the company’s “tremendous potential” for growth.
This move comes after Starbucks faced boycotts over the Gaza conflict after legal action against the US union Workers United for using its name and a similar logo last year.
Starbucks’ sales figures have been affected by boycotts related to the war in Gaza. Pic: AP
The decision came shortly after the union’s social media account expressed solidarity with the Palestinian people.
Other major US companies affected by Gaza-related boycotts, such as McDonald’s, have also experienced a drop in sales.
Starbucks stated its “official position” condemning the violence in the region.
